W & H Graphics, Inc. v. Hamby

• Citation: 48 N.C.App. 82,268 S.E.2d 567
• Decision Date: 05 August 1980
• Docket Number: No. 7925SC834,7925SC834
• Court: Court of Appeal of North Carolina (US)
• Parties: W & H GRAPHICS, INC. and Bobby E. Winkler v. Ronald D. HAMBY.

Page 567

268 S.E.2d 567

48 N.C.App. 82

W & H GRAPHICS, INC. and Bobby E. Winkler v. Ronald D. HAMBY.

No. 7925SC834.

Court of Appeals of North Carolina.

Aug. 5, 1980.

Billings, Burns & Wells, by W. Joseph Burns and Michael Wells, Winston-Salem, for plaintiffs-appellees.

W. P. Burkhimer, Lenoir, for defendant-appellant.

PARKER, Judge.

PLAINTIFFS' CLAIMS FOR RELIEF

The judgment entered 14 March 1979 was based upon the granting of plaintiff Winkler's motion at the close of trial to amend the pleadings to conform to the evidence and seek involuntary dissolution of the corporation pursuant to G.S. 55-125. The validity of that judgment as to plaintiffs' claims for relief depends upon whether the motion to amend was properly granted. We hold that it was not.

G.S. 1A-1, Rule 15(b) provides in part:

Amendments to conform to the evidence. When issues not raised by the pleadings are tried by the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, either before or after judgment, but failure so to amend does not affect the result of the trial of these issues. . . .

The purpose in adopting Rule 15(b) was to alter the strict code doctrine of variance which existed under our prior law. Roberts v. Memorial Park, 281 N.C. 48, 187 S.E.2d 721 (1972); Mangum v. Surles, 281 N.C. 91, 187 S.E.2d 697 (1972). As has been stated concerning the federal counterpart to our own rule:

The purpose of an amendment to conform to proof is to bring the pleadings in line with the actual issues upon which the case was tried; therefore an amendment after judgment is not permissible which brings in some entirely extrinsic issue or changes the theory on which the case was actually tried, even though there is evidence in the record introduced as relevant to some other issue which would support the amendment. This principle is sound, since it cannot be fairly said that there is any implied consent to try an issue where the parties do not squarely recognize it as an issue in the trial.

3 Moore's Federal Practice § 15.13(2) at 15-171, 15-172 (2d ed.); accord, Fowler v The present case began as a suit brought by W. H. Graphics, Inc. and Bobby Winkler, as a shareholder of plaintiff corporation, to recover damages and to obtain an accounting. ¹ Defendant's counterclaim was apparently grounded on the theory that the individual plaintiff had breached his fiduciary duty to the corporation, for which breach he sought a recovery of monetary damages. At trial plaintiff Winkler introduced evidence of the value of the printing equipment and other assets of the corporation which he had alleged defendant had no right to retain. He testified that at the time the parties agreed to cease doing business, plaintiff had proposed that defendant buy him out or buy the stock and keep the equipment and continue doing business as W & H Graphics, Inc. Defendant thereafter used the equipment in his own business, known as Hamby Printing. On cross-examination, plaintiff testified that he was issued 1305 shares of stock in the corporation in consideration of his payment of $10,000.00 and services previously performed. He identified numerous checks which he had written or cashed for the corporation and testified that most of them were for business purposes.

Johnson, 18 N.C.App. 707, 198 S.E.2d 4 (1973). Balancing the liberal philosophy of Rule 15(b) in favor of amendments against the notion of fairness to opposing parties, our Supreme Court has held that amendment to conform to the evidence is appropriate only where sufficient evidence has been presented at trial without objection to raise an issue not originally pleaded and where the parties understood, or reasonably should have understood, that the introduction of such evidence was directed to an issue not embraced by the pleadings. Eudy v. Eudy, 288 N.C. 71, 215 S.E.2d 782 (1975).

In turn, defendant offered evidence that during the time W & H Graphics, Inc. was a going business, he had handled the production end of the business, and Winkler the sales and promotion end. Defendant invested $4,000.00 in the business and received "a little over 400 shares of stock". Because of the individual plaintiff's neglect of his duties, the level of business fell between 1974 and 1976. Defendant testified that when the parties ceased doing business as of 31 December 1976, few assets remained. At that time they agreed that plaintiff Winkler would take the accounts receivable and defendant would take the equipment, and that eventually upon dissolution of the corporation, plaintiff and defendant would adjust the amounts received on liquidation to equalize their receipts. After December 1976 defendant opened up his own printing business known as Hamby Printing Company, at the same place of business formerly occupied by W & H Graphics, Inc. and used the equipment of W & H Graphics as well as new equipment he purchased on his own to carry on that business. In a verified affidavit filed prior to trial defendant stated that he held the assets as secretary and stockholder of W & H Graphics, Inc.

G.S. 55-125(a) provides that the superior court shall have power to liquidate the assets and business of a corporation in an action by a shareholder upon proof of any one of four conditions prescribed in that section. Subsection (4), which states one of those conditions, grants power to decree involuntary dissolution where "(l)iquidation is reasonably necessary for the protection of the rights or interests of the complaining shareholder." This statutory provision vests broad equitable powers in the trial court in determining whether a corporation should be involuntarily dissolved, Royall v. Lumber Co., 248 N.C. 735, 105 S.E.2d 65 (1958); see, Robinson, North Carolina Corporation The evidence presented in the present case was clearly sufficient to raise an issue as to the reasonable necessity of involuntary dissolution under G.S. 55-125(a)(4), thereby satisfying the first requirement established in Eudy v. Eudy, supra for amendment under Rule 15(b). The question remains, however, whether the second requirement of Eudy was met, that is, that the parties understood, or reasonably should have understood, that this evidence was directed to that issue. We hold that it was not. The necessary defendant in an action for involuntary dissolution of a corporation under G.S. 55-125 is the corporation itself. Shareholders and directors may, but need not be, made parties defendant unless relief is sought against them personally. Dowd v. Foundry Co., 263 N.C. 101, 139 S.E.2d 10 (1964); see G.S. 55-125(e). In the present case, the corporation was a party from the outset of the litigation, but only as a co-party with plaintiff Winkler, and both the individual and the corporate plaintiff were jointly represented by the same counsel. The allowance of Winkler's amendment under Rule 15(b) at the close of trial to state a claim for involuntary dissolution had the effect not only of amending the...